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Save or face pension poverty, consumers told

12 October 2004

The Pensions Commission has pointed to a massive "black hole" in the pension industry, which may leave millions in poverty in old age.

Britons must find an extra £57 billion a year to bring pension spending up to the European average of around 11 per cent of GDP, the commission said.

Last year the government set up the independent body to assess how best to handle the thorny political issue of pension reforms.

The commission, headed by former CBI chief Adair Turner, today warned that millions of Britons face poverty in old age if there are not major reforms to the pensions industry, because individuals are simply not saving enough for retirement.

"Now we've got to face the reality," Mr Turner said.

"Either pensioners will become poorer relative to the rest of society, or taxes have to go up, or people have to save more, or they've got to retire later," he said.

"There is no alternative to these four options," he added.

If things remain unchanged 12 million pensioners will face poverty in retirement, the report found.

But the report stated: "No single solution makes sense."

It also claimed that, without concerted efforts by the government to change attitudes, it is "unlikely" that the current systems, private and public, will solve the problem.

Kay Carberry, assistant general secretary of the Trade Union Congress, said last night: "It is very plain that the voluntary [contribution] system we have got is just not working.